Raw Finance

The Bureau of Economic Analysis (BEA) of the U.S. Commerce Department has released advance estimates of second quarter 2009 gross domestic product, showing a decline of 0.7 percent [revised 9/30/09, an earlier estimate pegged the drop at 1.0 percent].  The BEA also lowered the first quarter 2009 decline to -6.4 percent, from -5.5 percent.  For additional information, please click on the “Economic Growth Statistics” page on the menu bar above.

The BEA’s news release is reproduced below, but note a couple of key points: (1) the improvement from a recession/depression to “just” a recession is due largely to government spending; and (2) “Real personal consumption expenditures decreased 1.2 percent in the second quarter, in contrast to an increase of 0.6 percent in the first.”  For an economy that is driven by consumer spending, this is not good news.  The recession is stabilizing, but there is no evidence of a strong recovery on the horizon.

Barry Ritholtz, on his blog, The Big Picture, fills in a few more notable details:

-Federal Spending up a huge 11%;

-Real personal consumption expenditures decreased 1.2%;

-Smaller decreases were seen in business investment, exports and inventories;

-This is the first time we have had 4 consecutive negative quarters of GDP since record keeping began in 1947;

-Real nonresidential fixed investment decreased 8.9%;

-Last Quarter’s GDP was revised down from negative 5.5% to negative 6.4%;

Bottomline: An improving, but weak report.

Peter Boockvar notes that GDP fell more than expected as the deflator rose just .2% (vs expectations of a gain of 1%). Had the deflator been in line, REAL GDP would have fallen 1.8%.

Here is the BEA release:

Real gross domestic product — the output of goods and services produced by labor and property located in the United States — decreased at an annual rate of 1.0 percent in the second quarter of 2009, (that is, from the first quarter to the second), according to the “advance” estimate released by the Bureau of Economic Analysis.  In the first quarter, real GDP decreased 6.4 percent.

The Bureau emphasized that the second-quarter advance estimate released today is based on source data that are incomplete or subject to further revision by the source agency (see the box on page 3).  The “second” estimate for the second  quarter, based on more complete data, will be released on August 27, 2009.
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The estimates released today reflect the results of the comprehensive (or benchmark) revision of the national income and product accounts (NIPAs).  More information on the revision is available on BEA’s Web site at www.bea.gov/national/an1.htm, including links to an article in the March 2009 issue of the Survey of Current Business that discussed the changes in definitions and presentation that have been implemented in the revision and to an article in the May Survey that described the changes in statistical methods.  The September Survey will contain an article that describes the results of the revision in detail.  The Web site also contains FAQs and other information about the revision.
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FOOTNOTE.–Quarterly estimates are expressed at seasonally adjusted annual rates, unless otherwise specified.  Quarter-to-quarter dollar changes are differences between these published estimates.  Percent changes are calculated from unrounded data and are annualized.  “Real” estimates are in chained (2005)
dollars.  Price indexes are chain-type measures.

This news release is available on BEA’s Web site along with the Technical Note and Highlights related to this release.
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The decrease in real GDP in the second quarter primarily reflected negative contributions from nonresidential fixed investment, personal consumption expenditures (PCE), residential fixed investment, private inventory investment, and exports that were partly offset by positive contributions from federal government spending and state and local government spending.  Imports, which are a subtraction in the calculation of GDP, decreased.

The much smaller decrease in real GDP in the second quarter than in the first primarily reflected much smaller decreases in nonresidential fixed investment, in exports, and in private inventory investment, upturns in federal government spending and in state and local government spending, and a smaller decrease in residential fixed investment that were partly offset by a much smaller decrease in
imports and a downturn in PCE.

Motor vehicle output added 0.20 percentage point to the second-quarter change in real GDP after subtracting 1.69 percentage points from the first-quarter change.  Final sales of computers subtracted 0.04 percentage point from the second-quarter change in real GDP after adding 0.06 percentage point to the first-quarter change.

The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 0.7 percent in the second quarter, in contrast to a decrease of 1.4 percent in the first.

Excluding food and energy prices, the price index for gross domestic purchases increased 1.1 percent in the second quarter, compared with an increase of 0.2 percent in the first.

Real personal consumption expenditures decreased 1.2 percent in the second quarter, in contrast to an increase of 0.6 percent in the first.  Durable goods decreased 7.1 percent, in contrast to an increase of 3.9 percent.  Nondurable goods decreased 2.5 percent, in contrast to an increase of 1.9 percent.  Services increased 0.1 percent, in contrast to a decrease of 0.3 percent.

Real nonresidential fixed investment decreased 8.9 percent in the second quarter, compared with a decrease of 39.2 percent in the first.  Nonresidential structures decreased 8.9 percent, compared with a decrease of 43.6 percent.  Equipment and software decreased 9.0 percent, compared with a decrease of 36.4 percent.  Real residential fixed investment decreased 29.3 percent, compared with a decrease of
38.2 percent.

Real exports of goods and services decreased 7.0 percent in the second quarter, compared with a decrease of 29.9 percent in the first.  Real imports of goods and services decreased 15.1 percent, compared with a decrease of 36.4 percent.

Real federal government consumption expenditures and gross investment increased 10.9 percent in the second quarter, in contrast to a decrease of 4.3 percent in the first.  National defense increased 13.3 percent, in contrast to a decrease of 5.1 percent.  Nondefense increased 6.0 percent, in contrast to a decrease of 2.5 percent.  Real state and local government consumption expenditures and gross investment increased 2.4 percent, in contrast to a decrease of 1.5 percent.

The change in real private inventories subtracted 0.83 percentage point from the second-quarter change in real GDP after subtracting 2.36 percentage points from the first-quarter change.  Private businesses decreased inventories $141.1 billion in the second quarter, following decreases of $113.9 billion in the first quarter and of $37.4 billion in the fourth.

Real final sales of domestic product — GDP less change in private inventories — decreased 0.2 percent in the second quarter, compared with a decrease of 4.1 percent in the first.

Gross domestic purchases

Real gross domestic purchases — purchases by U.S. residents of goods and services wherever produced — decreased 2.3 percent in the second quarter, compared with a decrease of 8.6 percent in the first.

Disposition of personal income

Current-dollar personal income increased $8.0 billion (0.3 percent) in the second quarter, in contrast to a decrease of $251.7 billion (8.0 percent) in the first.

Personal current taxes decreased $113.1 billion in the second quarter, compared with a decrease of $241.7 billion in the first.

Disposable personal income increased $121.1 billion (4.6 percent) in the second quarter, in contrast to a decrease of $9.9 billion (0.4 percent) in the first.  Real disposable personal income increased 3.2 percent, compared with an increase of 1.1 percent.

Personal outlays decreased $18.1 billion (0.7 percent) in the second quarter, compared with a decrease of $27.6 billion (1.1 percent) in the first.  Personal saving — disposable personal income less personal outlays — was $566.0 billion in the second quarter, compared with $426.9 billion in the first.

The personal saving rate—saving as a percentage of disposable personal income—was 5.2 percent in the second quarter, compared with 4.0 percent in the first.  For a comparison of personal saving in BEA’s national income and product accounts with personal saving in the Federal Reserve Board’s flow of funds accounts and data on changes in net worth, go to http://www.bea.gov/national/nipaweb/Nipa-
Frb.asp.

Current-dollar GDP

Current-dollar GDP—the market value of the nation’s output of goods and services—decreased 0.8 percent, or $28.2 billion, in the second quarter to a level of $14,149.8 billion.  In the first quarter, current-dollar GDP decreased 4.6 percent, or $169.3 billion.

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Information on the assumptions used for unavailable source data is provided in a technical note that is posted with the news release on BEA’s Web site.  Within a few days after the release, a detailed “Key Source Data and Assumptions” file is posted on the Web site.  In the middle of each month, an analysis of the current quarterly estimate of GDP and related series is made available on the Web site; click on Survey of Current Business, “GDP and the Economy.”